NZGBs Bear Flatten On Wider Inputs

The major NZGB benchmarks finished 3-6bp cheaper on Tuesday as the curve bear flattened, while swap rates finished 3-6bp higher, as that curve steepened, leaving swap spreads mixed.

• The bid in Chinese & HK equities on the back of a modest downtick in the new COVID case s in China, as the run of new record daily totals came to an end, helped apply pressure.
• The local market close meant that the space didn’t participate in the sell off seen in wider core global FI on the back of news that the Chinese health authorities will hold a press conference on COVID later today (speculation surrounding the potential for a complete re-opening seems a bit misplaced to us, although there may be further tweaks to the country’s ZCS).
• Local headline flow was on the light side, with the most prominent headlines centring on the NZIER calling for a peak RBNZ OCR of 5.00%, 50bp shy of the Bank’s own forecast for the terminal rate.
• Terminal rate pricing on the RBNZ dated OIS strip continues to hover a little above 5.40%, with just under 70bp of tightening priced for the Bank’s first meeting of ’23.
• Looking ahead, building permits data and the monthly ANZ business survey headline the domestic docket on Wednesday.